Interest by Irish pension funds in buying out liabilities has more than doubled in the last year, despite subjects being sceptical about either the purchase of sovereign bonds or sovereign annuities – specifically introduced by the government to allow for such de-risking.
Discussing the pension industry's lack of enthusiasm for sovereign annuities – more recently blamed on Irish bond yields dipping below 5 per cent, meaning the product would no longer act as a "silver bullet" in addressing underfunding – Anthony Linehan, deputy director of funding and debt management at the NTMA, conceded that while he would be disappointed, the agency was working on other products of interest to pension investors. "One of the things going forward would be an inflation-linked bond, which again would be another way for pension funds to lock in real yields", he said.
Ingle, the IAPF's vice-chair, also noted that the trend to replace wound-up or closed defined benefit (DB) schemes was now split almost exclusively between pure defined contribution (DC) and hybrid arrangements, with a heavy emphasis on the former. Commenting that DC was the "winner" across all scenarios, Ingle said: "There is more analysis being done now to see whether or not hybrid can provide a benefit, but equally at a cost level and a volatility level that is more neutral to the employers".
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